Twenty years ago, associates joked that law firms paid "the going rate," which was defined as the lowest rate associates would accept before going.  A tongue-in-cheek partnership agreement printed in an ABA Journal joked that partnership profits would be divided between partners according to their needs–and everyone agreed that "heavy hitters" had big needs.  Law firms were leveraged, young lawyers were indentured, and everyone looked forward to the years when they could work less and benefit from the leveraging of younger lawyers.   Not anymore.

Perhaps you’ve heard that in late December, a relatively small Silicon Valley firm raised salaries for its associates by 40 percent, attempting to stem the flow of lawyers to internet start up companies–the "internet brain drain."   This idea quickly spread and some New York firms announced they would pay first year associates as much as $140,000–before bonuses.  Fourth-year associates might make more than $200,000.  To pay these salaries, firms will cut partners’ compensation or raise rates or both.

There are several interesting aspects to this particular round in the wage wars.  The speed with which these raises were accomplished, after the close of the regular recruiting season and "mid year" for many law firm compensation plans is unprecedented.   Many firms take the position that salaries and profits will be reviewed only once a year, but in this case, firms reacted swiftly and decisively, proving quick decisions can be made in law firms.  A common complaint about law firm management is that it’s too slow, too fragmented and too unresponsive.  This situation shows that firms can respond when they want to do so.  They should "want to" respond quickly more often on a wider variety of issues.

Another interesting point here was the speed with which the raises became common knowledge.    For that, you can thank or blame, depending on your perspective, the internet.  A group of chat boards on Yahoo! (www.clubs.yahoo.com) known as Greedy Associates spread the news like wild fire when lawyers compared salary data.  That kind of information sharing is very new and very frightening to law practices that still attempt to cloak compensation in reticence and privacy.  The anonymity offered by the internet, along with the hunger for information by associates who are not kept informed by firm management, feeds the chat boards. 

The comments by the anonymous "Greedy Associates" are quite interesting, too.   (As of this writing, the group has 1,877 members.)  If your management team hasn’t been reading them, they should be.  Forewarned is forearmed here.   Don’t make the mistake of thinking that because you don’t know what associates are thinking, somehow that means they aren’t thinking it!

Such comments as "show me the money or I’ll show myself the door," and "do any big firm partners really think that we went to big firms for any other reason but the money?" are disturbing.  They demonstrate the results of poor hiring techniques that generate more of the very attitude firms are trying to dissuade.  Is money going to be the main motivator for performance in your firm?  If so, then your firm is going to have to come up with quite a bit of it to keep people motivated.  If motivators other than money are the focus, that message needs to be delivered clearly in the hiring process, reinforced and delivered on the job, and relied on in times of monetary challenges.

The free agency status of lawyers today is reinforced by the chat boards that contain information about how to hire a "lawyer’s agent," as opposed to a "firm agent," for those lawyers seeking a lateral move.  The services claim they take on the role of advocate for the lateral lawyer, negotiating starting bonuses that exceed what the lawyer would get otherwise.

Although old ideas about leveraging lawyers, lock step compensation, reaping the financial rewards of law practice in your later years and a forty-year law practice with one firm are still around, they are rapidly vanishing.  New ideas must replace them if law practices are to survive. 

Law firms, in particular, will never win the wage war by the temporary solution of "throwing money" at the problem.  Instead, to keep lawyers on board, you need a more innovative approach.  You must still pay the "going rate," but you must also make sure lawyers are engaged with your practice.  They must have goals that are being met by your firm.  They must trust in leadership and have a stake in the outcome of your practice.  They must be progressing in their lives.  These days, lawyers want working to be an important part of a balanced life.  Today’s lawyers believe that no one on their death bed ever said they wished they’d spent more time at the office.

Will lawyers accept other benefits in lieu of more money?  Or will firms have to deliver both?  And if both are required, how will we do it?  Nothing less than a major overhaul of our current system will be required.  Where do we start?  With an open discussion and commitment to the lawyers you presently have.  You must commit to them and they will commit to you.  Then, you can build a practice.  Otherwise, you are only building a temporary cash machine.

PeopleWealth can assist your Professional Development staff on a regular or  consulting basis to communicate effectively with lawyers and to help lawyers design and build successful careers.  If you would like further information about PeopleWealth or our services, please contact our office, e-mail us: info@PeopleWealth.com   Or visit our web site at  www.PeopleWealth.com